The oil market is ignoring the fact that spare oil production capacity is very low right now, Saudi Aramco’s chief executive Amin Nasser said on Tuesday.
“[The market] is focusing on what will happen to demand if
recession happens in different parts of the world, they are not focusing on
supply fundamentals,” the top executive at the world’s largest oil firm and
single largest crude oil exporter, said at the Energy Intelligence Forum in
London today.
During an event last month, Nasser said that oil inventories
are low, “and effective global spare capacity is now about one and a half
percent of global demand.”
In September, Aramco’s CEO warned the markets that
policymakers need to look beyond this winter and stop vilifying the oil and gas
industry if they want to prevent the next energy crisis.
The ongoing energy crisis, while intensified by the Russian
invasion of Ukraine, didn’t start with the war, according to Aramco’s top
executive. Years of underinvestment, a lack of a backup plan, and alternatives
not ready to step up and replace conventional energy are the real causes of
this state of energy insecurity today, Nasser said at the Schlumberger Digital
Forum last month.
At the London forum today, he reiterated his view that
underinvestment would come back to haunt the markets.
According to Nasser, upstream underinvestment continues due
to pressure from investors and policymakers. Short-cycle projects are coming on
- not long-term projects that will anchor and sustain production.
“We need to build up some spare capacity in oil, gas and LNG
otherwise any outages or increased demand will seriously stretch producers and
could cause more turmoil in markets,” Aramco’s CEO noted.
“Oil demand will continue to grow until 2030,” Nasser added,
reaffirming the Saudi view that the world needs adequate oil and gas supply
before moving away from fossil fuels.
“Alternatives are not ready yet. We need to decarbonize oil
and gas and develop CCS but we must do this with adequate oil and gas supply,”
the Saudi executive said.
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